SEMI-ANNUAL
REPORT
JUNE 30, 1996
(GRAPHIC OF ROCKY MOUNTAIN LOGO)
A CAPITAL APPRECIATION INVESTMENT
ONE OF THE
AQUILASM GROUP OF FUNDS
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
SEMI-ANNUAL REPORT
August 7, 1996
Dear Investor:
We believe you will be pleased with the investment performance of Aquila
Rocky Mountain Equity Fund that we are reporting to you through this
Semi-Annual Report.
It is appropriate to provide you with the results of the Fund for the period
of January 1, 1996 through this Report date of June 30, 1996, as well as for
the year's period from July 1, 1995 through June 30, 1996, and the average
annual total return achieved by the Fund from its inception on July 22, 1994
through June 30, 1996.
6 Month Total Return
1/1/96 - 6/30/96
13.18%*
1 Year Total Return
7/1/95 - 6/30/96
18.71%*
Life of Fund - Avg. Annual Total Return
Inception (7/22/94) - 6/30/96
15.01%*
Illustrated in another manner, the graph below shows the pattern of the net
asset value share price at the Fund's inception through June 30, 1996.
(Graphic of Bar Chart with the following information)
<TABLE>
<C> <C> <C> <C> <C>
$11.43 $11.06 $12.62 $13.24 $14.97
7/22/94 12/31/94 6/30/95 12/31/95** 6/30/96**
<FN>
* In keeping with industry standards, total return figures indicated above
do not include sales charges, but do reflect reinvestment of dividends and
capital gains. Different classes of shares are offered and their performance
will vary because of differences in sales charges and fees paid by
shareholders investing in different classes. The performance shown
represents that of Class A shares, adjusted to reflect the absence of sales
charges, which is currently a maximum amount of 4.25% for this Class.
Management fees and certain expenses are being absorbed. Returns would be
less if sales charges, management fees, and expenses, were applied. Share
net asset value and investment return fluctuate so that an investor may
receive more or less than original investment upon redemption. The prospectus
of the Fund, which contains more complete information, including management
fees and expenses and which discusses the special risk considerations of the
geographic concentration strategy of the Fund, should, of course, be
carefully reviewed before investing.
</FN>
<FN>
** Reflects the value of dividend and capital gain distribution aggregating
$0.1059 per share paid on December 27, 1995.
</FN>
</TABLE>
<PAGE>
As the enclosed Statement of Investments illustrates, the assets of Aquila
Rocky Mountain Equity Fund are well diversified over a number of companies in
a variety of industries.
With the dynamic growth characteristics of the Rocky Mountain region,
there are many different attractive investment growth opportunities. The
Fund's Investment Adviser, KPM Investment Management, Inc., is attempting
to search out those capital growth prospects which can be bought for the
Fund at reasonable values.
As we have indicated to you in previous letters, we are seeking sound
long-term capital appreciation for your capital invested in the Fund. We do
this through thorough value analysis of the growth-oriented companies
represented in the Fund's portfolio and paying close attention to the price
we pay for the securities of those companies. As we all know, securities'
prices do fluctuate with changing market conditions. The bar chart above
reflects this. However, our goal is to offer you an attractive average
annual return while mitigating price volatility risks along the way.
This investment management approach seeks to provide a buffer to price
fluctuations in uncertain markets, while at the same time offering
appreciation prospects in rising market conditions. In general, this means
that the price of the Fund's shares should not suffer substantial declines in
adverse markets, yet will still appreciate nicely in rising markets.
In our book, absolute returns are what count. Sure, good performance
relative to various indexes is important and nice to achieve. But, in the
final analysis, it is an absolute return that you can "take to the bank."
We are finding attractive value-oriented growth prospects throughout the
Rocky Mountain region and expect to continue doing so for your benefit over
the future.
All associated with Aquila Rocky Mountain Equity Fund appreciate the
confidence you have placed in the Fund. We pledge to you our best efforts in
continuing to merit your trust.
Sincerely,
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
<PAGE>
<TABLE>
<CAPTION>
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENT OF INVESTMENTS
JUNE 30, 1996 (unaudited)
Shares Common Stocks Market Value
<C> <S> <C>
Basic Industry (1.4%)
400 Barrick Gold Corp. $ 10,850
300 Cyprus Amax Minerals Co. 6,787
200 Newmont Mining 9,875
27,512
Cable/Communications (9.7%)
1,500 Inter-Tel Inc.# 39,281
2,800 Jones Intercable Inc. Class A# 37,450
300 Jones Intercable Inc.# 4,313
1,000 Liberty Media Group Class A# 26,500
2,000 Tele-Communications Inc. Class A# 36,250
2,000 U.S. West Media Group# 36,500
1,300 United International Holding,Inc. Class A# 17,875
198,169
Consumer Cyclical (4.0%)
2,000 BMC West Corp.# 34,250
6,000 Mity Lite, Inc.# 46,500
80,750
Consumer Non-Durable (15.1%)
3,000 American Stores Company 123,750
3,000 Dial Corp. 85,875
2,200 Franklin Quest Company# 45,650
4,500 Rocky Mountain Chocolate Factory# 51,750
307,025
Energy (12.5%)
800 Barrett Resources Corp.# 23,800
4,500 Giant Industries, Inc. 65,250
1,800 KN Energy 60,300
6,400 Prima Energy Corp.# 94,400
2,500 Tipperary Corp.# 10,937
254,687
Financial (13.5%)
1,200 Finova Group, Inc. 58,500
2,600 First Security Corp. 62,400
4,875 First State Bancorp 63,375
1,500 Guaranty National Corp. 27,000
2,000 Life Partners Group Inc. 45,500
800 Security Bancorp 16,900
273,675
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENT OF INVESTMENTS
Shares Common Stocks (continued) Market Value
<C> <S> <C>
Gaming (9.9%)
1,200 Circus Circus Enterprises Inc.# 49,200
4,000 International Game Technology 67,500
4,800 Jackpot Enterprises 61,200
450 Mirage Resorts# 24,300
202,200
Healthcare (5.1%)
1,000 Ballard Medical Products 19,125
1,900 Sierra Health Services Inc.# 59,850
2,000 Utah Medical Products Inc.# 25,250
104,225
Technology (5.1%)
4,000 Artisoft Inc.# 35,000
300 Micron Technology 7,763
4,400 Novell Inc.# 61,050
103,813
Transportation (4.4%)
1,800 Rural/Metro Corp.# 61,650
1,500 Swift Transportation# 28,688
90,338
Utilities (8.0%)
400 Idaho Power Co. 12,450
2,000 Pinnacle West Capital 60,750
1,200 Public Service Co. Colorado 44,100
1,400 U.S. West Inc. 44,625
161,925
Total Common Stocks (88.7%) (Cost $1,536,704*) 1,804,319
Other assets in excess of liabilities (11.3%) 228,929
Net Assets (100%) $ 2,033,248
<FN> * Cost for Federal income tax purposes is identical.</FN>
<FN> # Non-income producing security.</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (unaudited)
<S> <C>
ASSETS
Investments at market value (identified
cost - $1,536,704) $ 1,804,319
Cash 177,646
Deferred organization expenses (note A) 45,881
Receivable for Fund shares sold 10,530
Due from Administrator for reimbursement of expenses 8,316
Dividends receivable 1,620
Total assets 2,048,312
LIABILITIES
Accrued expenses 13,855
Distribution fees payable 1,209
Total liabilities 15,064
NET ASSETS $ 2,033,248
Net Assets consist of:
Capital Stock - Authorized an unlimited number of
shares, par value $.01 per share $ 1,368
Additional paid-in capital 1,642,673
Undistributed net realized gain on investments 121,592
Net unrealized appreciation on investments 267,615
$ 2,033,248
CLASS A
Net Assets $ 2,033,038
Capital shares outstanding 136,823
Net asset value, redemption price per share $ 14.86
Offering price per share (100/95.75 of $14.86
adjusted to nearest cent) $ 15.52
CLASS C
Net Assets $ 105
Capital shares outstanding 7
Net asset value, offering price per share $ 14.86
Redemption price per share (* varies by length of
time shares are held) $ *
CLASS Y
Net Assets $ 105
Capital shares outstanding 7
Net asset value, offering and redemption price per share $ 14.86
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (unaudited)
<S> <C> <C>
INVESTMENT INCOME:
Dividend income $ 11,131
Expenses:
Investment Adviser fees (note B) $ 6,481
Administrator fees (note B) 7,406
Trustees' fees and expenses 9,500
Legal fees 9,000
Transfer and shareholder servicing agent fees 7,500
Amortization of organization expenses (note A) 7,475
Shareholders' reports and proxy statements 7,000
Audit and accounting fees 4,000
Registration fees and dues 4,000
Distribution fees (note B) 2,322
Custodian fees (note E) 342
Miscellaneous 2,475
67,501
Investment Adviser fees waived (note B) (6,481)
Administrator fees waived (note B) (7,406)
Reimbursement of expenses by Administrator
(note B) (26,243)
Expenses paid indirectly (note E) (342)
Net expenses 27,029
Net investment income (15,898)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from securities transactions 105,438
Change in unrealized appreciation on investments 135,031
Net realized and unrealized gain on investments 240,469
Net increase in net assets resulting
from operations $ 224,571
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS (unaudited)
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
<S> <C> <C>
OPERATIONS:
Net investment loss $ (15,898) $ (7,500)
Net realized gain from securities
transactions 105,438 32,529
Change in unrealized appreciation
on investments 135,031 149,483
Change in net assets from operations 224,571 174,512
DISTRIBUTIONS TO SHAREHOLDERS (note D):
Class A Shares:
Net investment income _ (721)
Net realized gain on investments _ (13,420)
Class C Shares:
Net investment income _ _
Net realized gain on investments _ _
Class Y Shares:
Net investment income _ _
Net realized gain on investments _ _
Change in net assets from
distributions _ (14,141)
CAPITAL SHARE TRANSACTIONS (note F):
Proceeds from shares sold 357,818 1,330,661
Reinvested dividends and
distributions _ 12,828
Cost of shares redeemed (285,869) (297,410)
Change in net assets from capital
share transactions 71,949 1,046,079
Change in net assets 296,520 1,206,450
NET ASSETS:
Beginning of period 1,736,728 530,278
End of period $ 2,033,248 $ 1,736,728
</TABLE>
See accompanying notes to financial statements.
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Aquila Rocky Mountain Equity Fund (the "Fund"), a diversified, open-end
investment company, was organized on November 3, 1993 as a Massachusetts
business trust and commenced operations on July 22, 1994. The Fund is
authorized to issue an unlimited number of shares and, since its inception
to May 1, 1996, offered only one class of shares. On that date, the Fund
began offering Class A, Class C and Class Y shares. The shares outstanding
prior to that date were designated as Class A shares and, as was the case
since inception, are sold with a front-payment sales charge and bear a
service fee. Class C shares are sold with no front-payment sales charge but
are assessed a contingent deferred sales charge if redeemed within one year
from the time of purchase and a level-payment charge for service and
distribution fees from date of purchase through six years thereafter. Class
Y shares are offered only to institutions acting for investors in a
fiduciary, advisory, agency, custodial or similar capacity, are not offered
directly to retail customers, and are sold at net asset value with no sales
charge, no redemption fee, no contingent deferred sales charge and no
service or distribution fees. All classes of shares represent interests in
the same portfolio of investments and are identical as to rights and
privileges but differ with respect to the effect of sales charges, the
distribution and/or service fees borne by each class, expenses specific to
each class, voting rights on matters affecting a single class and the
exchange privileges of each class.
The following is a summary of significant accounting policies followed
by the Fund in the preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles for
investment companies.
(1) PORTFOLIO VALUATION: Securities listed on a national securities
exchange or designated as national market system securities are valued at
the last sale price on such exchanges or market system or, if there has been
no sale that day, at the bid price. Securities for which market quotations
are not readily available are valued at fair value as determined in good
faith by or at the direction of the Board of Trustees. Short-term
investments maturing in 60 days or less are valued at amortized cost.
(2) SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME:
Securities transactions are recorded on the trade date. Realized gains and
losses from securities transactions are reported on the identified cost
basis. Dividend income is recorded on the ex-dividend date. Interest income
is recorded daily on the accrual basis.
(3) FEDERAL INCOME TAXES: It is the policy of the Fund to qualify
as a regulated investment company by complying with the provisions of the
Internal Revenue Code applicable to certain investment companies. The Fund
intends to make distributions of income and securities profits sufficient
to relieve it from all, or substantially all, Federal income and excise
taxes.
(4) ORGANIZATION EXPENSES: The Fund's organizational expenses have
been deferred and are being amortized on a straight-line basis over five
years.
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
(unaudited)
(5) ALLOCATION OF EXPENSES: Expenses, other than class-specific
expenses, are allocated daily to each class of shares based on the relative
net assets of each class. Class-specific expenses, which include
distribution and service fees and any other items that are specifically
attributed to a particular class, are charged directly to such class.
(6) USE OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of increases and decreases in net assets from operations during the
reporting period. Actual results could differ from those estimates.
NOTE B - MANAGEMENT ARRANGEMENTS AND FEES AND OTHER TRANSACTIONS WITH
AFFILIATES:
Management affairs of the Fund are conducted through two separate
management arrangements.
KPM Investment Management, Inc. (the "Adviser"), a wholly-owned
subsidiary of Kirkpatrick, Pettis, Smith, Polian Inc., serves as Investment
Adviser to the Fund. Kirkpatrick, Pettis is, in turn, a subsidiary of the
nationally oriented Mutual of Omaha Insurance Company. In this role, under
an Investment Advisory Agreement, the Adviser supervises the Fund's
investments and provides various services to the Fund for which it is
entitled to receive a fee which is payable monthly and computed as of the
close of business each day on the net assets of the Fund at the following
annual rates; 0.70 of 1% on the first $15 million; 0.55 of 1% on the next
$35 million and 0.40 of 1% on the excess over $50 million.
The Fund also has a Sub-Advisory and Administration Agreement with
Aquila Management Corporation (the "Sub-Adviser"), the Fund's founder and
sponsor. Under this agreement, the Sub-Adviser provides such advisory
services to the Fund, in addition to those services provided by the
Adviser, as the Sub-Adviser deems appropriate. Besides its sub-advisory
services, it also provides all administrative services, other than those
relating to the management of the Fund's investments. This includes
providing the office of the Fund and all related services as well as
overseeing the activities of all the various support organizations to the
Fund such as the shareholder servicing agent, custodian, legal counsel,
auditors and distributor and additionally maintaining the Fund's accounting
books and records. For its services, the Sub-Adviser is entitled to
receive a fee which is payable monthly and computed as of the close of
business each day on the net assets of the Fund at the following annual
rates; 0.80 of 1% on the first $15 million; 0.65 of 1% on the next $35
million and 0.50 of 1% on the excess over $50 million.
Specific details as to the nature and extent of the services provided
by the Adviser and the Sub-Adviser are more fully defined in the Fund's
Prospectus and Statement of Additional Information.
The Adviser and the Sub-Adviser each agrees that the above fees shall be
reduced, but not below zero, by an amount equal to its pro-rata portion
(determined on the basis of the respective fees computed as described above)
of the amount, if any, by which the total expenses of the Fund in any fiscal
year, exclusive of taxes, interest and brokerage fees, shall exceed the most
restrictive expense limitation imposed upon the Fund in the States in which
shares are then eligible for sale. At the present time none of the States in
which the Fund's shares are sold have any such limitation.
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
(unaudited)
For the six months ended June 30, 1996, the Fund incurred fees under
the Advisory Agreement and Sub-Advisory Agreement of $6,481 and $7,406,
respectively. However, all of these fees were voluntarily waved.
Additionally, the Sub-Adviser voluntarily agreed to reimburse the Fund for
other expenses during this period in the amount of $26,243.
Under a Distribution Agreement, Aquila Distributors, Inc. (the
"Distributor") serves as the exclusive distributor of the Fund's shares.
Through agreements between the Distributor and various broker-dealer firms
("dealers"), the Fund's shares are sold primarily through the facilities of
these dealers having offices within the general Rocky Mountain region, with
the bulk of sales commissions inuring to such dealers. For the six months
ended June 30, 1996, the Distributor received sales commissions in the
amount of $99.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940. Under one part
of the Plan, with respect to Class A Shares, the Fund is authorized to make
service fee payments to broker-dealers or others selected by the Distributor,
including, but not limited to, any principal underwriter of the Fund, with
which the Distributor has entered into written agreements contemplated by
the Rule and which have rendered assistance in the distribution and/or
retention of the Fund's shares or servicing of shareholder accounts
("Qualified Recipients"). The Fund makes payment of this service fee at the
annual rate of 0.25% of the Fund's average net assets represented by Class
A Shares. For the six months ended June 30, 1996, service fees on Class A
Shares amounted to $2,322, of which the Distributor received $255.
Under another part of the Plan, the Fund is authorized to make payments
with respect to Class C Shares to Qualified Recipients which have rendered
assistance in the distribution and/or retention of the Fund's Class C shares
or servicing of shareholder accounts. These payments are made at the annual
rate of 0.75% of the Fund's net assets represented by Class C Shares. There
were no payments made during the period May 1, 1996 through June 30, 1996.
In addition, under a Shareholder Services Plan, the Fund is authorized to
make service fee payments with respect to Class C Shares to Qualified
Recipients for providing personal services and/or maintenance of shareholder
accounts. These payments are made at the annual rate of 0.25% of the Fund's
net assets represented by Class C Shares. There were no payments made during
the period May 1, 1996 through June 30, 1996.
Specific details about the Plans are more fully defined in the Fund's
Prospectus and Statement of Additional Information.
NOTE C - PURCHASES AND SALES OF SECURITIES:
For the six months ended June 30, 1996, purchases of securities and
proceeds from the sales of securities aggregated $150,435 and $208,617,
respectively.
At June 30, 1996, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted
to $343,888 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over market value amounted to $76,273,
for a net unrealized appreciation of $267,615.
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
(unaudited)
NOTE D - DISTRIBUTIONS:
The Fund declares annual distributions to shareholders from net
investment income, if any, and from net realized capital gains, if any.
Distributions are recorded by the Fund on the ex-dividend date and paid in
additional shares at the net asset value per share or in cash, at the
shareholder's option. Due to differences between financial reporting and
Federal income tax reporting requirements, distributions made by the Fund may
not be the same as the Fund's net investment income, and/or net realized
securities gains.
NOTE E - CUSTODIAN FEES:
The Fund has negotiated an expense offset arrangement with its custodian
wherein it receives credit toward the reduction of custodian fees whenever
there are uninvested cash balances. During the six months ended June 30,
1996, the Fund's custodian fees amounted to $342, all of which were offset by
such credits. The Fund could have invested its cash balances in an
income-producing asset if it had not agreed to a reduction in fees under the
expense offset arrangement with the custodian.
NOTE F - CAPITAL SHARE TRANSACTIONS:
Transactions in Capital Shares of the Fund were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, 1996 Year Ended Dec. 31, 1995
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 24,901 $ 357,618 106,291 $ 1,330,661
Reinvested dividends and
distributions _ _ 985 12,828
Cost of shares redeemed (20,398) (285,869) (22,898) (297,410)
Net change 4,503 $ 71,749 84,378 $ 1,046,079
</TABLE>
<TABLE>
<CAPTION>
Period Ended June 30, 1996*
Shares Amount
<S> <C> <C>
CLASS C SHARES:
Proceeds from shares sold 7 $ 100
Reinvested dividends and
distributions _ _
Cost of shares redeemed _ _
Net change 7 $ 100
</TABLE>
<TABLE>
<CAPTION>
Period Ended June 30, 1996*
Shares Amount
<S> <C> <C>
CLASS Y SHARES:
Proceeds from shares sold 7 $ 100
Reinvested dividends and
distributions _ _
Cost of shares redeemed _ _
Net change 7 $ 100
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Total transactions in
Fund Shares 4,517 $ 71,949 84,378 $ 1,046,079
</TABLE>
* From May 1, 1996 through June 30, 1996.
<PAGE>
<TABLE>
<CAPTION>
AQUILA ROCKY MOUNTAIN EQUITY FUND
FINANCIAL HIGHLIGHTS
(unaudited)
For a share outstanding throughout each period
Class A(1)
Six
Months Year Period
Class C(2) Class Y(2) Ended Ended Ended
Period Ended June 30, Dec.31, Dec. 31,
June 30, 1996 1996 1995 1994(3)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $14.59 $14.59 $13.13 $11.06 $11.43
Income from Investment
Operations:
Net investment income (loss) - - (0.12) (0.07) -
Net gain (loss) on
securities (both realized
and unrealized) 0.27 0.27 1.85 2.25 (0.37)
Total from Investment
Operations 0.27 0.27 1.73 2.18 (0.37)
Less Distributions (note D):
Dividends from net
investment income - - - (0.01) -
Distributions from capital
gains - - - (0.10) -
Total Distributions - - - (0.11) -
Net Asset Value, End of Period $14.86 $14.86 $14.86 $13.13 $11.06
Total Return (not reflecting
sales charge) (%) 1.85# 1.85# 13.18# 19.68 (3.24)#
Ratios/Supplemental Data
Net Assets, End of Period
($ thousands) 0.1 0.1 2,033 1,737 530
Ratio of Expenses to Average
Net Assets (%) - - 2.94* 1.91 1.19*
Ratio of Net Investment Loss
to Average Net Assets (%) - - (1.73)* (0.60) -
Portfolio Turnover Rate (%) 8.93# 8.93# 8.93# 15.14 2.95#
<CAPTION>
Net investment income (loss) per share and the ratios of income and expenses
to average net assets without the Adviser's and Administrator's voluntary
waiver of fees, the Administrator's voluntary expense reimbursement and the
expense offset in custodian fees for uninvested cash balances would have
been:
<S) <C> <C> <C> <C> <C>
Net Investment Income (loss)
($) - - (0.43) (1.12) -
Ratio of Expenses to Average
Net Assets(4) (%) - - 7.34* 10.48 18.20*
Ratio of Net Investment Loss
to Average Net Assets (%) - - (6.13)* (9.17) -
<FN> (1) Designated as Class A Shares on May 1, 1996.</FN>
<FN> (2) New Class of Shares established on May 1, 1996.</FN>
<FN> (3) From July 22, 1994 (commencement of operations) to December 31,
1994. </FN>
<FN> (4) These ratios are based on average net assets of $1,849,249,
$1,239,752 and $453,768, respectively. In general, as the Fund's
net assets increase, the expense ratio will decrease.</FN>
<FN> # Not annualized.</FN>
<FN> * Annualized.</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
REPORT ON THE SPECIAL MEETINGS OF SHAREHOLDERS (UNAUDITED)
Special Meetings of Shareholders of Aquila Rocky Mountain Equity Fund (the
"Fund") were held on April 19, 1996 for the Fund's Class C and Class Y
Sharesholders.* At the Special Meeting of Class C Shareholders of the Fund,
the Class C Shareholders voted on and unanimously approved amendments to the
Fund's Distribution Plan affecting the interests of the Class C Shareholders
of the Fund. At the Special Meeting of the Class Y Shareholders of the Fund,
Class Y Shareholders voted on and unanimously approved amendments to the
Fund's Distribution Plan affecting the interests of the Class Y Shareholders
of the Fund.
___________
* On the record dates for the Special Meetings, the total net asset values of
the Class C and Class Y Shares of the Fund outstanding and entitled to vote
were $100 and $100, respectively. The holders of all Class C and Class Y
Shares entitled to vote were present in person at the meetings.
ADMINISTRATOR AND SUB-ADVISER
AQUILA MANAGEMENT CORPORATION
380 Madison Avenue Suite 2300
New York, New York 10017
INVESTMENT ADVISER
KPM INVESTMENT MANAGEMENT, INC.
A Mutual Of Omaha Company
One Norwest Center
1700 Lincoln Street
Denver, Colorado 80203
and
10250 Regency Circle, Suite 200
Omaha, Nebraska 68114
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Tucker Hart Adams
Arthur K. Carlson
R. Thayne Robson
Cornelius T. Ryan
OFFICERS
Lacy B. Herrmann, President
W. Dennis Cheroutes, Regional Sr. Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
AQUILA DISTRIBUTORS, INC.
380 Madison Avenue, Suite 2300
New York, New York 10017
CUSTODIAN
BANK ONE TRUST COMPANY, N.A.
100 East Broad Street
Columbus, Ohio 43271
TRANSFER AND SHAREHOLDER SERVICING AGENT
ADMINISTRATIVE DATA
MANAGEMENT CORP.
581 Main Street
Woodbridge, New Jersey 07095-1198
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
345 Park Avenue
New York, New York 10154
Further iformation is contained in the Prospectus,
which must precede or accompany this report.
